′Can we do this?′ - The costs of the migrant crisis | Business | Economy and finance news from a German perspective | DW | 23.08.2016

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'Can we do this?' - The costs of the migrant crisis

To measure the true costs of the recent mass influx of migrants and refugees into Germany, reliable data are a must. However, that is what is exactly missing. DW examines what this means for the German taxpayer.

At the moment it's still unclear how many refugees there are in Germany. Between September 2015 and July 2016, a total of 900,623 foreigners were registered in the so-called EASY system, which is used for processing cases of asylum seekers in Germany.

However, it's not a reliable figure, as the refugees are registered anonymously, without their names or passport numbers. "That's why there could be missing and duplicate entries," a spokeswoman for Germany's Federal Office for Migration and Refugees (BAMF) told DW.

"It's also unfortunately not possible to say how many of these registered people are still residing in Germany, as no personal data are gathered," she added.

Line of refugees

At the end of 2015, the huge number of refugees arriving in Germany caught authorities woefully unprepared, and still many of them are waiting to be granted asylum status.

Nevertheless, what's safe to say is that the number of migrants arriving in Germany has fallen this year, according to EASY data, reaching 16,300 in June, which was sharply down from the 91,600 in January.

Still, the number of asylum applications is on the rise as the country's overburdened bureaucracy is still in the midst of processing the huge pile of applications. According to BAMF data, 441,899 people filed applications for asylum last year. But by the end of July this year, that number was already as high as 468,762. It's yet unclear how many of those will in fact be approved, as last year the approval rate stood at just 50 percent. But so far this year, over 60 percent of the applications filed have been approved.

Estimated costs

Under German laws, asylum seekers and refugees have to be cared for, housed, fed and trained for work. Numerous studies conducted by renowned German economic think tanks have showed that each refugee costs Germany between 12,000 and 20,000 euros per year.

On the basis of these and other estimates, the finance ministry projects that asylum-related costs for the federal government would amount to about 99.8 billion euros ($113 billion) between 2016 and 2020, meaning 20 billion euros a year.

This estimate is slightly higher than that in May this year when the federal government projected it to be around 94 billion euros. This rise is largely due to the federal government pledging increased assistance to states and municipalities to overcome the challenges posed by the migrant influx. It included accomodation costs for recognized asylum seekers, in addition to increased spending on integration courses as well as a program to build social housing, a finance ministry spokesperson told DW.

This year, the government in Berlin is set to pay 6.9 billion euros as "immediate relief" to states and municipalities - the biggest asylum-related expenditure in 2016. However, in future financial transfers to recognized asylum seekers are expected to account for the lion's share of the total spending of almost 20 billion euros.

But the figures vary vastly depending on the underlying assumptions. For instance, researchers at the Kiel-based Institute for the World Economy (IfW) project the total cost to be between 19.7 and 55 billion euros in 2022.

Burden or investment?

The money likely to be spent on refugees has become a source of heated debate in Germany because some also say the extra spending must not be seen only as a burden.They argue that some of the money flows back to the state again.

ministry building

The refugee crisis has turned out to become a job machine for Germans. The BAMF, for instance, has seen the number of its permanent staff double from 3,000 to around 6,000 since the beginning of the crisis.

German regional governments also created 15,813 new teaching jobs for refugees, German business magazine "WirtschaftsWoche" reported recently. And there are even more teachers needed - estimates speak of 25,000 in schools and vocational training institutes, in addition to a total of 14,000 employees in childcare facilities as well as many social workers and psychologists.

A report released by the Institute for Labor Market and Occupational Research (IAB), said that additional jobs will be created in other sectors too, including construction and urban planning as well as extra-curricular teaching, language coaching, security and public administration.

The expenses incurred by the German state for the integration of refugees should not be viewed merely as costs, but rather as investment, Christian Proano, a professor of economics at the University of Bamberg, told radio station Deutschlandradio. "This investment could boost future economic growth in Germany while, at the same time, easing the pressure on the nation's social security funds."

A long-term study conducted by the Mannheim-based ZEW economic institute supports this view: "If the refugees' integration and job search proceed optimally, then within two decades the public funds will have additional revenue amounting to some 20 billion euros." However, the researchers pointed out that in the worst-case scenario, the additional burden on the German state could just as well be as high as 400 billion euros.


But the big question is how many migrants and refugees will be able to find work in the foreseeable future, which will allow them to support themselves and their families without having to recourse to social welfare. It seekms only logical that the job prospects of refugees will strongly depend on German language skills and their qualifications and educational background.

A BAMF study revealed that only two percent of the asylum applicants last year had any German language skills. And little is known about their education and job skills. "There are currently no representative data on the educational and professional qualifications of the asylum seekers and refugees," an IAB report said in July.

At the moment, there are only indications on this front. For instance, until June this year, some 300,000 people - who arrived in Germany as asylum seekers - were officially registered as looking for a job. While a quarter of them had a high school diploma or anything deemed equivalent, another quarter had not even finished primary school, the IAB said.

Overall, the report presented a dismal picture, noting that the migrants and refugees had "a low level of professional training."

"Of all the job-seeking refugees in June 2016, nearly 74 percent had no formal vocational training," the report concluded.

Still, the researchers see an "enormous educational potential," as most of the migrants and refugees are relatively young people. Over half of this year's asylum applicants are aged less than 25 years.

Labor market

In the fall of 2015, big German companies announced that they wanted to hire refugees and train them. However, there hasn't been much success so far. The 30 most valuable German firms, which have a total of 3.5 million people on their payrolls, have thus far managed to employ a mere 54 refugees, German daily "Frankfurter Allgemeine Zeitung" reported. And 50 of them were hired by a single company, German mail and logistics company Deutsche Post.

working refugees

Some experts argue the government should sponsor low-wage jobs, earning refugees one euro per hour, to help them get used to the German labor market.

The situation is slightly better at the more than 100 companies that launched the "We together" initiative. On balance, these firms have hired a total of 449 refugees for permanent positions and created 534 apprenticeships, they told DW. "But unfortunately we don't have any data on when the refugees arrived in Germany," a spokeswoman said, meaning they could have come to Germany well before the mass influx last fall.

According to German Federal Employment Agency statistics released in August, a total of 136,000 people from different asylum countries of origin had found jobs in this country, an increase of around 30,000 from the year before. Most of them, however, had arrived in Germany before the summer of 2015.

For German officials it still takes quite some time to sort out refugees identities and to provide them with a residential status for this country. On average, it takes around 22 months for young refugees to begin professional training, said a recent survey by the Association of German Chambers of Commerce and Industry (DIHK).

The federal government, meanwhile, expects a spike in the unemployment rate over the next few years, with the number of jobless people here estimated to rise from the current 2.7 million to over 3 million by 2020, most of this due to jobless refugees.

Financing issues

Although the data are unreliable, one thing seems to be certain: If the government fails to do what is needed for the integration, education and training of refugees, it will only increase the burden on the German taxpayer in the long run. It is "a race against time," says economist Christian Proano. "We should rather spend a little extra money now than fret about it in ten or 20 years."

Still, the question as to how it should be financed remains. Given that the German economy continues to be in good shape, Finance Minister Wolfgang Schäuble remains confident that he will be able to finance the additional expenses without either slashing spending in other areas or raising taxes. But should Germany face economic headwinds, the debate over the refugees could turn even more virulent than it already is.